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Weekend homes are cash cows for greedy councils

Nov 2nd, 2011
by JP Floru.
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Why is Eric Pickles doing favours for fat local councils and class-struggling LibDems?  His announcement that local councils will be able to abolish the council tax discount for the 246,000 second homes in England makes no sense whatsoever.  The measure will raise insufficient funds to cut the council tax in any meaningful way.  LibDems will still demand a tax on so-called mansions. What is the point?  The second home tax rise is just another tax, with all its usual characteristics: unfair, excessive, to pursue political rather than rational goals, and to punish success.

Today, councils can offer second home owners up to 50% discounts on their council tax bill.  Few do; four in five opt for the statutory minimum discount of 10% instead.  If you think about it, this is grossly unfair: second home owners use very few local council services.  They use some public infrastructure, but only on the days they are in residence.  In view of their disproportionately low use of the services which pay for it, a 10% discount is in itself laughable.  Now Eric Pickles wants to do away with even this meagre concession.  Second home owners are already a cash cow for greedy local councils: now they will become even more so.

Often second home owners only use one council service: the rubbish collection.  But even then, the council collects far less rubbish from them than from full time residents.  And as we all know rubbish collections have been reduced to bi-weekly in many councils.  A friend recently calculated that with his £2,500 council tax for his second home, and bi-weekly collection of, on average, just one bag, he is effectively paying £69 for each rubbish bag he puts out.

The proposal has been portrayed as a re-distributive measure: it would allow councils to cut the council tax.  In fact, it will do nothing of the sort: the scrapping of the discount will raise virtually no money at all.  Each English council will receive something in the region of £174,000 in additional revenue.  The measure is basically aimed at keeping the LibDems quiet about a tax on so-called mansions.  Not that it will calm them down.  To the LibDems the new measure will be welcome: what is more just than punishing those who work hard and are well off as a result?  LibDems love aspiration, as it enables them to tax more.

One wonders how many voters voted Conservative in order to see re-distributive measures enacted.  Perhaps Mr. Pickles thinks he needs left wing votes – to compensate for his traditional right-wing voters who may very well decide to jump ship at the next general election after last week’s three-line whip against a referendum on Europe?

The council tax is ridiculously high in most places in England.  Many local councillors never question the size of local government.  To fund the empire building and the endless stream of vanity projects which they hope will catapult them to political B-stardom, they are on a never-ending quest for more revenue.  Another friend told me the value of his second home is one third of the value of his London home.  Yet the council tax for the second home is three times that of his London home.

The problem is not second homes.  The problem is fat local government.

 

JP Floru is Director of Programmes, Adam Smith Institute & a Councillor for the City of Westminster

The immorality of the 50p rate

Sep 16th, 2011
by JP Floru.
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The 50p tax rate harms the poorest in society most. It can do so in two ways: their jobs may cease to exist or never be created; and because the poor end up paying a larger share of the total tax take. It is time for the Government to stand up for what is morally just and get rid of the 50p rate.

When you increase tax on the rich, they have less money to spend. So they cut back. What do they cut back on? They may reduce spending on luxury objects: not buy that painting or that antique chest. This is likely to be a minor change – their house may be full already. Or they may reduce spending on services. Restaurants may suffer in a minor way. Minor, because the rich still have to eat and typically do not have much time to cook for themselves.

Or perhaps they cut back on domestic staff: the window cleaner, the cleaner, the cook, the gardener. Precisely those jobs for which you do not need university degrees or a long CV. In other words: the jobs for the less well-off are the most likely to be dispensed with. Sometimes full national insurance paid jobs will be replaced by cash-in-hand jobs. Full time may become part-time – now entitling the cleaner to claim housing and other benefits. This is the trickle-down effect; so often derided, but a daily reality for those who have not many opportunities at the best of times.

A large number of studies have shown that if you cut tax for the highest earners, they end up paying a higher share of the total. The opposite is true, too: when you increase their taxes, the less well-of pay a higher share. This is because paying for tax experts who can find methods to avoid taxes becomes a more lucrative alternative than to pay the increased tax. In addition high earners (and companies) will flee – either in person, or with their capital. There is a lot of evidence that this is happening in the UK right now. Those who are no high earners therefore end up paying a larger share of the total tax take.

All this is made worse by the fact that the rate was introduced as a political measure. The fact there needs to be a review on whether it raises money demonstrates that there was no work done before its introduction to prove it would raise money. We need to say this loud and clear. Taxing high earners more does not make the rich suffer much: it’s the poor who end up poorer.

Councils don’t need to go to Mipim

Mar 10th, 2011
by JP Floru.
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The Telegraph has a very interesting article today about councils who send council officers to Mipim, the annual get-together of the property industry in Cannes.   Andrew Gilligan reports how the registration cost alone is £1,300 per person.  Add to this the flights, hotels, and disbursements… Some councils also organise special events.  Manchester, for example, laid on a private bar for its delegates, “Manchester Dinners” in “The Manchester Apartment”, and the Manchester Stand with a second bar and terrace offering beautiful views of the Croisette.

Some quick research taught me that Westminster Council, where I am a Councillor, does not send planning officers to Mipim.  In fact our Director of Planning, Rosemarie MacQueen, was quoted in last year’s property press as saying that she thought it unnecessary, and a waste of Council resources.  “If I wish to meet a developer, I can do so in my office – over a self-made cup of tea”, she stated. There simply isn’t a need for councils to send staff Mipim.

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